Dealing with company debt in New Zealand? We all know that overdue invoices and unpaid accounts can throw a real spanner in the works when it comes to cash flow. Company debt management is often a tricky balancing act. Before you start thinking about writing those debts off for tax purposes, there’s a proper process to follow that keeps things above board with the IRD (Inland Revenue Department) and helps you get the most out of your business finances.
How Company Debt Affects Cash Flow (And What You Can Do About It)
In New Zealand, unpaid debts aren’t just a hassle, they can really mess with your cash flow. Cash flow is everything when you’re running a business. It’s what keeps the lights on, pays the bills, and allows you to grow. But if debts start stacking up and nothing’s coming in, that can leave you in a tricky spot. Managing company debt is key to keeping things running smoothly and making sure your cash flow stays healthy.
How to Manage Company Debt (The Right Way)
The IRD isn’t going to let you write off a debt for tax purposes unless you’ve made a good effort to get it sorted. So, if you’ve got overdue debts, here’s the best way to manage them and get your business finances back on track:
- Get a Debt Collection Agency Involved The first step in tackling unpaid debts is to bring in a professional. A debt collection agency knows exactly how to chase those debts down and recover what’s owed to you. By doing this, you’re showing you’ve taken all reasonable steps before deciding to write off the debt. It’s the right move and keeps everything above board.
- Let the Debt Collection Efforts Run Their Course Once you’ve got the agency working on it, let them do their thing. They’ll go through all the steps to try and recover the debt, whether that’s through reminders, negotiations, or even legal action if needed. Only after all these efforts have been exhausted can you think about moving forward with a write-off.
- Talk to Your Accountant About Tax Write-Offs After you’ve determined the debt is genuinely uncollectible, it’s time to chat with your accountant. They’ll help you figure out if it can be written off for tax purposes and guide you on how to adjust your books. It’s all about keeping your financials accurate and making sure you stay on the right side of the tax rules.
- Adjust GST on Written-Off Debts If you’re registered for GST (which most businesses are), you’ll need to adjust for any GST you previously claimed on the unpaid debt. Don’t worry, your accountant will help you with that. They’ll make sure your GST records are tidy and compliant.
- Sort It Before the End of the Financial Year (EOFY) Don’t leave it until the last minute! Sorting out debts and writing them off before the end of the financial year (EOFY) will help you tidy up your financial records. It keeps things clean and ensures you don’t run into any issues with cash flow or tax when the new year rolls around.
Why Company Debt Management Is So Important for Cash Flow
When you’re running a business, your cash flow needs to stay steady. And if overdue debts keep piling up, it can prevent you from paying suppliers, covering operating costs, and investing in growth. Getting on top of company debt management as early as possible will stop those overdue accounts from wrecking your cash flow.
Plus, by handling write-offs the right way and staying compliant with the IRD, you can avoid any tax headaches. And let’s be honest, nobody wants that. The sooner you deal with debt, the better for your financial future.
Managing Debt in Small Businesses: It’s a Big Deal
For small businesses in New Zealand, managing debt is even more important. Debt management for small businesses is essential to ensure you’ve got enough cash to keep the business humming along. Smaller businesses often don’t have the resources to chase overdue accounts, so getting on top of this early is even more critical.
If you’re a small business owner, you know how tight the margins can be. Every dollar counts. That’s why it’s important to have a clear plan for managing overdue debts. Professional debt collection agencies can help you recover those debts so you can focus on the stuff you do best, running your business.
Plus, getting your accountant involved will make sure everything stays compliant with New Zealand’s tax rules. Sorting out your debts the right way means you’re protecting the business from long-term financial stress.
If you’re looking for more tips on managing debt for small businesses, check out our guide on debt recovery for small businesses, where we dive into the best ways to tackle overdue accounts and keep your cash flow in the green.
Final Thoughts on Company Debt Management in New Zealand
At the end of the day, company debt management is about staying on top of overdue accounts and keeping your finances in check. By working with debt collection professionals, getting your accountant on board, and adjusting your GST and tax records, you can avoid bigger problems down the road.
And don’t forget, sorting out bad debts before the EOFY will help you stay compliant and make your financials look tidy for the new year. It’s a win for your business and your cash flow.
Need Help Managing Company Debt or Improving Cash Flow?
If you’re struggling with overdue accounts or want some help with company debt management in New Zealand, it’s time to take action. Working with a debt collection agency and an accountant can help you get your finances back on track. Don’t let unpaid debts hold you back, contact a professional today and start improving your cash flow.
Got a question or need help?
Sentinel is happy to jump on a quick call and help you gain a better understanding of company debt management, particularly if you need advice on debt recovery for your small business. Drop us a message and we can arrange a time for a call.
With over 30 years of experience working with more than 200 businesses across a wide range of industries, I bring a strong mix of business insight, technical expertise, and leadership to drive results. From startups to global enterprises, I have played a key role in overcoming challenges, driving growth, and streamlining processes. I’m passionate about empowering small businesses and individuals, building strong relationships, and delivering lasting value. Specialising in debt collection, I help organisations manage their receivables and improve cash flow, ensuring long-term success.
My expertise covers crafting business strategies, optimising processes, mentoring leaders, and providing guidance on IT Service Management and debt recovery solutions for small and medium businesses.